Countrywide Financial, which is in the middle of a crisis amid rising delinquencies and foreclosures, on Tuesday, said it plans to offer refinancing options to subprime borrowers.
The largest U.S. mortgage lender said it will initiate a program to refinance or modify up to $16 billion of Countrywide loans for borrowers who are facing an adjustable-rate mortgage reset through the end of 2008.
Countrywide said borrowers currently in a subprime loan with a strong payment history it will offer options to refinance into prime or Federal Housing Administration loans.
Of course, the total amount of resets in the market probably had something to due with that (hat tip, Calculated Risk)
Simply put, from Countrywide's perspective it's good business to start figuring out a way to allow people to not get hammered by spiking resets. Especially considering Congress is now getting into the act:
The chairman of the House Financial Services Committee is pushing for broad, industrywide overhaul of the way mortgages are offered, securitized and supervised.
Rep. Barney Frank (D., Mass.) introduced legislation that would, among other things, prohibit mortgage brokers, bankers and others from steering borrowers toward more-expensive loans in order to receive greater compensation. It would prohibit prepayment penalties on subprime loans and limit prepayment penalties on prime loans.
Mr. Frank said the bill's goal is to "diminish predatory lending while continuing to support a rigorous mortgage market. It creates a national standard for giving mortgages, originating mortgages, which will cover every mortgage originator," he said in a conference call with reporters.
Predatory lending practices have been remarkably underreported during the last few years. That does not mean it hasn't gone on; it's just the story isn't as a high a priority for journalists. However, it would not surprise me to learn there were some fairly unscrupulous practices going on in the lending world.
